How Epic Fortunes Were Created During the California Gold Rush

Before the California Golf Rush, San Francisco had a population of about 500 people. There were no roads or bridges, and it took six months for goods to arrive by ship. The federal government had plans to build roads and railways, but those were long-term projects. The news of gold changed everything. In 1849 and 1850, one out of every 100 Americans traveled to California, nearly 200,000 people, dreaming of gold. Most of them didn’t find any, but they put San Francisco on the map. The people who really prospered from the Gold Rush were those who sold goods or services to all those newcomers. And they did it in many ways, some far away from California. Three men raised a million dollars to build a railway across Panama, which cut travel time from America’s East Coast to the West Coast in half.

The three men financing and constructing the Panama Railway knew very little about railroads, which is probably the only reason the railway was built. In the unfriendly Panamanian terrain, the men exhausted their capital in a year and laid only 7 miles of track. But the frenzied gold seekers saved the project.

The hundreds of thousands of people headed to California desired nothing more than speed. In 1851, a group of migrants asked to use the seven-mile track to speed their Panamanian crossing. The railroad owners realized they could profitably run trains on their unfinished railway, and the profits from the new passengers, along with new investment from Wall Street, paid for the $8 million construction project that still awes engineers to this day.

When the engineers hammered the last spike to finish the railway in 1855, the company had already been profitable for years. Soon it became the most highly valued company on the New York Stock Exchange. It took a small cut of the value of all cargo, and people returning from California took $500 million worth of gold on the railway in just 10 years.

Others became rich by providing tools, clothing, food, and entertainment for prospectors and miners. But the biggest fortunes were made by real estate speculators. Read about the fortunes that were made by non-miners during the Gold Rush at Pricenomics.